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But then the company crashed, the staff was fired, shareholders filed lawsuits and Chairman-CEO Fernando Espuelas resigned.
After virtually disappearing, StarMedia is back under new ownership. The challenge now is to persuade a skeptical advertising community the StarMedia brand can be saved.
New French ownership
Last October, French telecommunications subsidiary Wanadoo, a profitable $2 billion European Internet and online directories business, bought Spain's EresMas Internet company, three months after EresMas acquired StarMedia's name and URL.
"We're rebuilding the company from scratch, based on new technology, and building a commercial operation for the U.S. Hispanic and Latin American markets," said Wanadoo Spain's head of sales, Aquilino Pena, who will oversee StarMedia. Mr. Pena's first hire was Harry Neuhaus, a veteran of Yahoo! and AOL Time Warner's Turner Broadcasting System who becomes StarMedia's Miami-based vice president of sales.
Throughout all its troubles, StarMedia held onto 5 million e-mail users who still use their free StarMedia e-mail accounts and are largely unaware of the company's problems, the executives said.
"That's good news on eyeballs," said a U.S. Hispanic agency executive who is considering using StarMedia. "Now they need to do huge damage control on the media and marketing side."
Ad-supported business plan
StarMedia's plan is to be entirely ad supported, using DoubleClick for ad serving and offering large-format square ads utilizing rich media technology rather than banner and pop-up ads. Mr. Neuhaus said StarMedia will also go after direct-marketing campaigns, because its e-mail accounts "are all opted-in permission marketing." To keep costs low, most of StarMedia's content will come from more than 20 EresMas vertical portals in Spain that cover areas such as sports, cars and women, Mr. Pena said.
"Eventually we'll do a trade campaign that's very targeted to the Hispanic ad community to let people know we're still here," Mr. Neuhaus said. StarMedia is using a new theme: "Tu gente. Tu idioma" ("Your people. Your language").
Carlos Santiago, president of Santiago Solutions, a Hispanic consulting firm in San Francisco, questioned whether content will be local enough. He noted that Terra, based in Spain like EresMas, struggled to localize its content and promotions, doing everything from beach soccer tournaments to partnering with Spanish-language TV network Telemundo on a U.S. Hispanic reality show.
The U.S. Hispanic online ad market is worth less than $100 million a year, but competition is fierce among online players AOL Latino, Terra, Univision.com, Yahoo! en Espanol and Yupi MSN. And south of the border, Latin American economies are in trouble. Still, seemingly in hibernation and without any promotion, StarMedia has continued to score surprisingly high in user rankings. In new research for January 2003, comScore Media Metrix's U.S. Hispanic panel showed about 60% as many Spanish-preferred users for StarMedia as for the other Spanish-language portals.
The Hispanic agency executive said StarMedia's best bet may be to offer very low prices.
"I don't really care what happened [in the past] if the users are still there," said the agency executive. "StarMedia's competitive advantage could be price and delivering results. They'll have to prove themselves and they know it."